How credit unions can help

As the recession leaves many people spiralling into debt in a bid to get by, the Birmingham Mail’s Consumer Editor Emma McKinney finds out how credit unions are helping people to get a grip on their finances.

As the recession leaves many people spiralling into debt in a bid to get by, the Birmingham Mail’s Consumer Editor Emma McKinney finds out how credit unions are helping people to get a grip on their finances.

ONCE upon a time, not so long ago, you could get credit at a drop of a hat.

Banks, building societies and loan companies were bending over backwards to offer out loans.

But dishing out too much credit has seen the country’s economy collapse, and now banks aren’t so willing to cough up cash.

Meanwhile, as unemployment rockets, people are struggling to make ends meet, with house repossessions soaring and more and more people going to extreme lengths to get money, often turning to illegal loan sharks for help.

Last month the Mail revealed how many of these sharks were forcing vulnerable women to have sex in exchange of paying back their debts, while money watchdogs warned against using doorstep lenders charging extortionate interest rates.

But amid the doom and gloom, credit unions are offering a ray of hope for people, say money experts.

Often under-publicised, there are more than 500 unions across the country offering loans, savings and current accounts and, unlike banks, they’re not about making money.

One such union is Circul8, which developed out of former unions over the last two decades and got its name because it helps people living in areas around the number eight bus route in Newtown, Nechells and Ladywood.

Run by Pertemps People Development Group (PPDG), which is a Government-backed business that helps the long-term unemployed find work, it is based at the Newtown Development Centre, in Newtown Shopping Centre.

Velma Sweeney, chief cashier at Circul8, explains: “Credit unions aim to help you take control of your money by encouraging you to save what you can and borrow only what you can afford to repay.

“In essence, they’re a savings and loan co-operative, which just means that members pool their savings together to lend to one another and help to run the credit union.

“This is done in a ‘not-for-profit’ way, so the cash is only used to run the services and reward members, not to pay outside shareholders, like most other financial institutions.

“Throughout the year, those running the credit unions must put aside enough money to ensure they don’t go bust.

“Any money that’s left over is channelled back to those who have a savings account as a dividend, or it’s used to try and improve the overall service. To keep all the money safe, credit unions can’t lend out all their members’ savings or plough the remainder into anything that carries too much risk.

“Plus all money in savings unions has the same government protection as bank savings accounts.”

Circul8 now has more than 2,000 members and is helping people avoid the pitfalls of debt, says Velma.

“We reach out to people through local churches and community projects,” she says. “We teach them how to get out of debt and start saving.

“We can also help people to learn how to pay their bills, it’s about showing there is a way of handling your finances other than turning to lenders who charge a fortune in interest or dodgy loan sharks.”

The union is also helping to educate youngsters at William Cowper Primary School in Newtown, teaching them that if you look after the pennies, the pounds look after themselves.

The school now runs a ‘bank’ in partnership with the credit union encouraging children to save money.

“Unfortunately people don’t save money like they used to,” says Phil Pemble, public relations manager for PPDG.

“There are an awful lot of people who rely too heavily on credit and loans and can get themselves into financial difficulties with serious consequences.

“We are hoping to encourage children to save money regularly. It’s a life lesson which we hope they will carry through into adulthood.

“If we can get primary school children to save, it will become a good habit and they may realise how important being a saver is in later life.”

Contact Circul8 on 0121 234 359 3034 or 0121 454 0534 or to find a credit union near you call Abcul on 0800 015 3060 or pop in to your local Citizen’s Advice Bureau.

* DAWN PRAWLE’S STORY:

SINGLE mum Dawn Prawl was desperate to make some cash to help support her family.

A dab hand with a needle and thread, the 44-year-old, of Newtown, wanted to launch her own clothes making business.

However, looking after her two sons Renel, aged 21, and Cosby, 14, by herself, meant money was tight and she had no spare cash to fund the sewing equipment she needed to start the business.

Not sure where to turn, she visited PPDG of advice, and that’s where she discovered the Circul8 credit union.

“They told me that they offered really low interest loans and I thought it would be the perfect way to start my business,” said Dawn.

“It meant I could buy the equipment I need and get going, without worrying about how much money I would have to pay back.

“I know people who have taken money off loan sharks and have got themselves into all sorts of problems.

“I wanted a secure future for me and my kids and I didn’t want to start going down that route.”

The Circul8 loan meant Dawn was able to buy the equipment she needed and she now successfully runs Dawn Prawl Fashion from her home, making made to measure dresses, jackets, shirts, coats, trousers and waistcoats.

“The great thing about the credit union is that if, for some reason, I find I can’t meet a repayment, I won’t be hit with a penalty charge that many banks and loan companies make you pay,” she added.

“The union’s there as my back-up and I know that without it I would never have been able to make a success out of my own business.”

* NANETT EDWARDS’ STORY:

NANETT Edwards had never considered using a credit union - not until she began working for PPDG as a personal development coach five years ago.

The 49-year-old, of Newtown, would often find herself having to help clients who had become gripped by debt and feared there was no way out.

“That’s when I found out about Circul8,” she said. “I was having, and do even more these days in the recession, at least one or two people a day coming in telling me they were having to use a loan shark and they were really badly in debt.

“The debt was causing this catch 22 situation. They wanted to get work but feared if they had money coming in from a job they would have to pay it all out to loan sharks and to paying off their debt.

“The credit union helped them by getting them low interest debt and really sorting them out.

“I never realised I could benefit from it too until I head about the savings accounts the union does.”

Now Nanette, who is mum to 29-year-old Rebekah and Isaac, 23, has opened savings accounts for each of her grandchildren - Darnell, eight, Tyrell and Ashan, both three, Cairo, two, and six-week-old Romario.

“I have my own account that I put money in for things like holidays, Christmas and birthday presents,” said Nanett.

“It’s nice to have an account outside of my normal bank and it’s very convenient.

“Instead of getting the grandchildren presents, I put money aside for them.

“It’s not a great deal but it will build up over the years and I’ll give it to them when they need it the most when they are either 18 or 21.”